Self-Employed Accounting Software

bookkeeping for independent contractors

These financial statements include your income statements and balance sheets. Every day that we come into work, we take pride in the part we play in helping our neighbors succeed. The communities of the Bay Area recognize the effort we put in for them, and it shows. If you look at what businesses who’ve tried our bookkeeping nearby are saying, you’ll see one five-star testimonial after another. The best indication of the quality of our services is that our past customers are united in their praise for Better Bookkeepers. It’s a specialized computer program that’s designed as a flexible, easy-to-use accounting solution.

bookkeeping for independent contractors

This may include creating a chart of accounts, setting up a system for recording financial transactions, and establishing a process for reconciling bank accounts. If you aren’t sure about what type of system you need, we recommend reaching out to a professional bookkeeping company, like BooXkeeping, for a free consultation. Independent contractors are self-employed individuals who work for themselves and not for an employer. They typically work on a project basis and are not considered employees of the company they work for. Independent contractors have a unique set of bookkeeping needs compared to traditional employees, as they are responsible for their own taxes and financial record-keeping.

Spreadsheet Organizer for Tax Year 2021

You might get sick or a natural disaster occurs and you are not be able to complete the work assigned. Even a change in the demand for your service can be impacted by changing trends. If you’re just starting out or only have a few clients, then start with a basic version of accounting software that is less expensive.

Currently, that means you will pay social security 15.3%-12.4% and Medicare 2.9%. As an independent contractor, you have a lot more freedom than employees of most workplaces. You pay taxes on your own, set hours on your own, and you are your own boss. Per Diem Rates Still Apply
If you have yourself set up as an employee of your company, you may be entitled to a per diem allowance when you travel a certain distance from home to conduct business. Provided you comply with the IRS rules (ask your accountant!) this can help reduce your tax burden when working on projects that require long-distance travel. Read more about misclassification and the difference between hiring employees and independent contractors.

Free contractor accounting software & finance app to manage your income and expenses

Do you have an existing bookkeeping system that has been making errors or takes more time than you’d like? In this case, hiring Better Bookkeepers for a one-time review is your solution. We can perform an exhaustive review of your books and documentation procedures, identify problems, and propose lasting solutions. Furthermore, we can design a new system that’s specialized to the unique needs and priorities of your business.

bookkeeping for independent contractors

Leverage Your Health Benefits
Properly managing your health benefits can effectively reduce your tax liability. For 2012 you can contribute up to $3,100 for an individual, or $6,250 for a family. As you pay for medical expenses to meet your deductible, they are taken from your HSA. If you do not use the funds they will roll over, earning pre-tax interest, which then can be applied to future healthcare costs. If your firm ever comes under IRS scrutiny, it’s important that you have documentation establishing the status of each of the independent contractors (“ICs”) you’ve hired. Doing this process will help reviewing your financial statements easier and make filing your tax return, federal tax, payroll taxes a breeze.

What You Need to Know About Virginia Active Military and Veteran Tax Benefits

The contractor is required to pay self-employment taxes, which is far less likely to happen if the employer does not provide a 1099. The IRS is likely to extend their accountant for independent contractors audit to the contractor if a 1099 was not provided. Ultimately, this situation will end on a sour note for both the employer and the independent contractor.

bookkeeping for independent contractors

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